One more thought. If you do add this to your employees formal policy, in the near future, it’s quite possible that others will learn who caused the problem. This could create a rift in employee moral and/or tension between this man and others.
You are going to let us know how this goes, right?
We’re pulling for you, Foxy!
I beleive this is something they take up with the 401(K) plan administrator, not you.
It sounds like you’re not going to put a policy in writing Foxy, but if you decide to do so, make sure you talk to a lawyer about it. IANAL, but I think that the above suggested policy is illegal in CA, for example, because there are lots of restrictions to overcome if you’re going to try to withhold someone’s pay (even if they owe you money). Who knows what kind of fair lending/employment/contract law you might run afoul of if you take some common sense advice from a message board and put it on paper as official company policy.
I think that the solution you’ve settled on is classy and generous.
Definately an attorney. There may also be tax implications in all of this, which you may have run afoul of already just by loaning out the money.
If you were to do this, it would have nothing to do with you, it would be handled by whoever does your 401k (Fidelity, Vanguard, …). It’s a pretty simple procedure, ot it was when I did it to borrow money for my house down payment fifteen years ago.
Yep. Also some plans don’t allow for loans. It just depends on how it was set up.
And at least in our plan, the person cannot contribute while the loan is outstanding. My understanding is that borrowing from a 401(k) is financially unwise, but I could be wrong.
The way mine worked was that the amount of the loan could be no more than half of what you had and that you paid yourself back with interest through payroll deductions. The term was either exactly 30 years which could only be used to buy a home or for exactly five years which could be used for anything.
I needed an extra $6k to be able to buy a house so I did what I had to do. While I missed out on any gains that the missing money would have made if it was still invested in stocks, the house is worth something like $700k more now than when I bought it so it worked for me. Using it to pay for a party is probably not such a good move.
I had a long post. I’ll save you the rambling.
I work for a good company that is a fair company. We have one pain in the ass employee that quit just this week who is responsible for most of the stupid rules that we now have to abide by. Yes, we call them the Crystal Rules. We know they were implemented because our company has a policy if you screw with the rules, the rules get changed. Instead of them calling the rule breakers/advantage takers/selfish twits on their shit, we all get punished for all eternity.
Please. Pretty Please. You have employees that have been with you for over a decade. Do not start treating them all like infants because you have ONE person who may or may not be taking advantage of the situation.
Think of the folks who came to you for help. That really needed it. That helped make a difference in their lives.
Because of our one pain in the ass employee every other employee gets the shaft. We all know why the rules have come down changed. And yes, we hate her for it. While her behavior has led to the rules being changed for everyone, we really, really wish that management would not use such a broad brush when one thin brush would fix the problem.
Please, please, see the bad apple for what it is. If you must change policy, change it to require that it must be for emergency use only and not for things known in advance. Heck, there is a huge difference between a blown engine and a wedding reception. And I was in real estate long enough to know that a closing that requires a couple thousand more than you were told isn’t that uncommon. A wedding isn’t an emergency, especially if one of them isn’t pregnant. 
Gosh, I’m sorry, I still rambled. I’ll think of you when I sign my write up for missing the 2nd day in 3 years not counting maternity leave. (Yes, I worked the day I got pregnant and the day I delivered and called in sick ONCE)
So Foxy40, are you going to tell us what happened, or just leave us hanging?
I called him into my office at 5pm. He took a seat. It went something like this.
Me: I want you to know that I have considered your request for a loan very carefully. Generally I have given loans in the past for emergency use as you well know and have taken advantage of. However, I do not think a wedding reception would constitute an emergency.
Him: Well, it is an emergency of sorts. We weren’t prepared for the amount of guests that are coming from out of town and the hotel rooms they will need.
Me: Again, I am not sure this constitutes an emergency but I have decided to loan you this money. I want to make sure you realize that as with the other loans you have taken, it must be paid back within six months. Before you agree to this loan, you may want to discuss this with (his partner) and make sure this fits into your budget. A credit card would have more liberal repayment terms even if you do need to pay interest. I have also heard (thanks dopers) that there is a possibility that you could take a loan out on your 401K. Do you want me to look into that?
Him: No. That is my only savings and I don’t want to disturb that money right now.
Me: Okay. I also want you to know that I am going to need to limit loans to once every two years since the paperwork and payroll deductions involved are taking a toll on accounting and it really isn’t in their job description to handle these types of things. I want to make sure that the fund that I have for these loans is available for those really in need.
Him: Yes, I understand but you do know that this is very important to me.
Me: Yes and I am very happy for you.
I then told him how much it would be and he said he would get back to me today about whether or not he can afford it. He seemed shocked at the high amount. I don’t know if he expected to pay it back over years but that certainly is not going to happen. I haven’t seen him yet today.
I appreciate the help and advice. I was inclined to say no but I agree that turning him down could cause problems that I don’t want to deal with.
Very well done.
Very well done indeed.
Nice work.
Stranger
Heh, I can only imagine his surprise when you told him he’d have to pay back 666 dollars per month. LOL! Not the number you want associated with your wedding!
Very well done. Gracious and generous, but you made your point. Bravo!
Auntbeast
So you didn’t take a sick day to have sex? 
I have to rush to work, so I can’t stay to read all the responses, but if it hasn’t been said yet…
**
‘Emergency funds’ are for small, quickly-needed amounts that it’s not feasible to get a personal loan for. ** For example, $500 to fix the car. $200 for that unexpected dentist’s bill.
Once a figure is high enough to justify taking a proper personal loan, then that’s what employees should do.
If that’s not your policy at present, it should be. In writing, if need be.